Buy local or bye-bye farmers: Coke boss

SPC Ardmona's fate is a warning that local food producers need support if the industry is to survive, Coca Cola-Amatil boss Terry Davis says.

By Peter Trute, AAP Senior Finance Writer

AAPFebruary 18, 20146:09pm

DEPARTING Coca Cola-Amatil boss Terry Davis hopes consumers and retailers have realised that if they don't buy Australian produce, there won't be any Australian farmers.

Mr Davis announced a $404 million writedown to fruit and vegetable cannery SPC Ardmona on Tuesday, the move dragging the full-year profit of parent company Coca Cola-Amatil (CCA) down by 82.5 per cent.

Mr Davis said the reduction was inevitable after SPC was severely damaged by a "perfect storm" of a high Australian dollar, cheap imports and unfair laws around tariffs and quality control.

The writedown came despite SPC Ardmona securing $22 million in Victorian government assistance towards a $100 million improvement package.

Mr Davis was hopeful the new money would give the cannery a sound future.

"Hopefully we've turned the tide with SPC by getting Australian consumers to understand that if we all don't support Australian-grown produce then we won't have farmers, we won't have fruit and vegetable growers in this country," he said at a results briefing.

Mr Davis said major retailers had recognised their role in supporting food growing areas but said the federal government - which rejected a request for $25 million in support for SPC - had to take some responsibility for the food sector.

"I also hope that the federal government recognises that they also have a role to play. On this point I may be an optimist," he said.

The SPC Ardmona writedown comprised $277 million in goodwill, a $39.7 million reduction in the value of brand names and $87.3 million in inventory and equipment value.

It reduces the value of the company to just over $300 million.

In response to an analyst's question, Mr Davis said CCA has not lost the flexibility to exit the SPC Ardmona business under its funding agreement with the Victorian government.

However Mr Davis told AAP after the briefing that he fully expected SPC Ardmona to honour job retention commitments given as part of the funding agreement.

Presenting his final results before handing over to incoming chief executive Alison Watkins in March, Mr Davis reported a net profit of $79.9 million for CCA for the year to December 31, 2013, down from $457.8 million a year earlier.

Excluding the SPC writedown, after-tax profit was $502.8 million.

Trading revenue for the year was down 1.2 per cent to $5.04 billion, while earnings were down 6.9 per cent to $833.3 million due to competition pressures on drink pricing in Australian supermarkets, cheap imports hitting SPC Ardmona and a slowdown in Papua New Guinea's market.

For 2014, Mr Davis said CCA "remain concerned by the generally weak consumer confidence and spending environment and the continued softness of the carbonated beverage category in the grocery channel".

Deutsche Bank analyst Michael Simotas said the result was weaker than expected and the company's outlook was downbeat.

CCA announced a final dividend of 32 cents, franked at 75 percent, taking total dividends for the year to 58.5 cents.